"We believe these decisions, while extremely difficult, will result in Carvana restoring a better balance between its sales volumes and staffing levels and facilitate Carvana returning to efficient growth on its mission to change the way people buy and sell cars," the company said in the filing.
The layoffs relate to “recent macroeconomic factors that are significantly impacting automotive retail,” a Carvana spokesperson said in a statement.
They come just weeks after Carvana reported a $506 million loss in the first quarter as high used-vehicle prices, rising interest rates and other issues affecting the auto industry dented sales. It felt higher costs and a lower profit per vehicle than expected.
It’s not just Carvana taking a hit in the tumultuous market. Digital retail companies that received a long period of boosted sales and elevated customer interest during the COVID-19 pandemic are now seeing some cooldown, and it’s reflecting in their earnings.
Vroom Inc., one of Carvana’s competitors in the online used-retail space, on Monday said it would consider a workforce reduction as part of a larger plan to realign its business strategy and boost gross profit per vehicle sold. Vroom also appointed a new CEO.
The company on Tuesday finalized its $2.2 billion acquisition of ADESA U.S., the nation’s No. 2 auction house.
The layoffs are the first step taken as part of Carvana’s plan pare costs amid challenging sales, Stephens Inc. analyst Daniel Imbro said in a research note.
Affordability could remain troublesome for Carvana and more cost cutting could happen in the coming weeks, Imbro said.
“While this reduction should help with cash burn, we believe it is a recognition that these headwinds may not pass as quickly as hoped,” Imbro said.
Carvana said it would post more details about its operating plan to its investor relations website later in the week.
Carvana said the laid-off employees will get four weeks of pay plus an extra week for every year they have been with the company.
Carvana’s stock has fallen from the $376 high it reached last August to less than $40 as of Tuesday. Most recently shares slipped 1.6 percent to $38.12 as of 3:20 pm EDT Tuesday.